MoCo, an Austrian-owned mortgage lender that recently emerged in the Republic, caused a stir by offering mortgages repayable until the borrower turns 80. This concept, once unique, is beginning to spread. ICS Mortgages, following suit, proposed similar home loans this week, despite previously only offering loans to be paid back by the borrower’s 70th birthday, a standard in most banks. The upper limit for these payments typically varies from 75 to 80 in the United Kingdom.
However, these non-traditional lenders swear by responsible lending; to be eligible for such extended loans, prospective borrowers must show tangible repayment facilities, such as pensions or rents earned from other properties. Yet, it should be mentioned that these types of loans aren’t ideal for everyone and require careful consideration from both the borrower and lender.
Entering into a mortgage payable even beyond one’s 70s bears consideration, particularly as private sector pensions have seen a decrease owing to a shift from final salary linked schemes to those that depend on how investments perform. This could be a reason why an individual might entertain the idea of a prolonged loan.
The current situation of the Irish housing market, coupled with regulation on mortgage limitations set in 2015, means nearly half of first-time house buyers are currently over 35, a stark increase from the fewer than 20% seen two decades ago. With the maximum age set by banks for repayments, the possibility of procuring another home may be unattainable for some.
Another significant consideration is that roughly 10% of Irish marriages end in separation or divorce. Mortgages with repayment obligations set until the age of 70 can limit many from starting anew and purchasing another house. The alternative is retirement faced with rental costs.
ICS believes that extended borrowing times might motivate and assist individuals in relocating as they age, potentially freeing up homes for growing families.
However, the concept of repaying a conventional mortgage up until the age of 80 serves as an alternative to equity release and home reversion products aimed at older borrowers. However, borrowers need to seek independent financial advice before entering into any of these possibilities.